Business Broker vs M&A Advisor: Understanding the Different Types of Business Sale Advisors

Understanding the Different Types of Business Sale Support: Corporate Finance vs M&A Advisors vs Business Brokers

Many business owners assume all advisors provide a similar service. In reality, the differences in approach, experience, and outcomes can be significant.

The UK market includes a wide range of business brokers and M&A advisors, matched almost in equal measure by the different terminology they use to describe themselves. From Corporate Finance to Business Broker, and Business Transfer Agent to Boutique M&A Advisor.

Unfortunately, these terms have no standard meaning and cannot be used to reliably identify the type of advisor you are dealing with. Here is a breakdown of the five main types and how to tell the difference.

Listings

Typical deal size:

<£1m – although not exclusively, this tends to be an option for smaller businesses or franchise opportunities where advisory fees would constitute a significant proportion of the value generated.

Model:

Much like any other online marketplace platform this model offers business owners a space to advertise their business for sale. This approach is not without merit as it offers a low-cost DIY option for smaller businesses. However, you are entirely reliant on active acquirers searching the listings so the keywords you use and getting the right balance between what you disclose and what you don’t is key.

Strengths:

• Accessible entry point for small businesses and owners who want/need a DIY sale
• Low initial financial commitment
• Can be a good way to ‘test’ the market appetite for a business like yours

Weaknesses:

• Very limited transaction support, if any, which can leave you exposed when trying to get a deal across the line
• Heavily reliant on being found by active acquirers
• Can be a crowded marketplace in some sectors making it difficult for your business to stand out

Business Transfer Agents (Volume Brokers)

Typical deal size:

<£2m – this type of agent will target any size of business as their model is built on volume metrics – while they will take on businesses of any size, they are most likely to deal in transactions of under £2m.

Model:

Agents in this space take a high-volume approach, meaning their focus is on getting as many mandates in the front door as possible. This makes their business sustainable through fee income and increases their chances statistically of completing deals. They will often use the same listing sites that are available to business owners and/or rely on a network of acquirers to achieve those successful sales. Some advisory support is offered, but it is often limited and junior in nature – this will vary depending on provider.

Strengths:

• Accessible entry point for small businesses or owners who require minimal support
• Can offer a low initial financial commitment, but be wary of some very one-sided t’s and c’s, especially in relation to success fees

Weaknesses:

• Low initial effort results in low completion rates, the industry averages around 20% completion
• Any advisory support offered is often junior led which can leave you exposed with a deal on the table
• Buyer engagement is often limited to those trawling listing sites or the usual suspects of serial acquirers resulting in a lack of competitive tension in the process which can harm valuations
• A volume model can lead to over-selling resulting in unrealistic valuation expectations being set

Boutique M&A Advisors (SME & Sector Specialists)

Typical deal size:

Generally, SME deal values sit around £2m – £15m, but in some cases values can reach £50m+ depending on sector, appetite, growth and cash in the business.

Model:

Although approaches vary dramatically from advisor to advisor, this tends to be the space where real advisory starts to come into the equation. Advisors in this space will put in much more effort across a proven and structured process to assist their client with a deal. As a result, advisors tend to be more selective in the mandates they take on. While most charge some consultancy fees, it’s often not until deals complete that these advisors turn a profit. Preparation and positioning play a big role in the process because of their strong focus on advisory. Deals are often led by senior team members, typically supported by a qualified team.

Strengths:

• Hands-on support – while the level can vary across providers, clients typically enjoy a much greater level of support throughout the process.
• The model is flipped from volume to quality resulting in a strong focus on business owner outcomes rather than volume.
• Although normally process-driven to an extent, the senior-led approach allows for a more tailored, bespoke buyer strategy where appropriate.
• A completion-weighted fee structure means advisors of this type have a stronger incentive to ensure the business is fully prepared before going to market and for the due diligence phase to avoid deal creep and value chipping.

Weaknesses:

• The level of support offered can result in advisory firms taking on a limited number of clients due to capacity constraints.
• Because of pricing models that are more typically weighted to successful completion, these advisors tend to be more selective in the clients they will engage with – wanting to have a certain level of confidence in success.
• It can feel like a higher cost option, however, the aim should be that any additional cost in this approach is outstripped by better value and better terms.

Mid-Market / Corporate Finance Advisors

Typical deal size:

Although some definitions start at £10m, a more realistic range is £50m to £300m. Deals of this size are rarer, hence why most ‘mid-market’ firms will also take on smaller deals.

Model:

At this size, deals are often more complex, requiring larger teams (generally juniors led by a senior partner) and more work – especially in the due diligence stages. That said, more of the transactions are between corporate entities rather than owner-managed businesses, meaning emotions are less of a factor and more transactional. Because there is a lot more data published on deals of this size, valuation estimates are simpler, although the uniqueness of a company can still have a dramatic impact on multiples. Advisors in this space often rely heavily on strong buyer networks and sector experience can really play a role in getting the best outcome.

Strengths:

• Often served by larger organisations with additional specialisms, such as accountancy or wealth management, these firms offer deep transactional experience
• They generally have excellent links with large corporate and private equity buyers looking for larger acquisitions

Weaknesses:

• Not ideally geared for sub £50m deals and as a result are less focused on owner-managed businesses and often lack the personal touch that SME business owners value.
• A higher cost base is inevitable due to larger teams and a less flexible infrastructure.
• The process itself can feel less tailored and personal, often leaving owner-managers feeling unsupported at crucial stages of the deal.

Growth & Exit Preparation Advisors

Typical focus:

Generally working with business owners who want to grow and position their business to achieve a specific valuation, usually in the £2m – £50m range. Could be working with businesses from 18 months to 5 years plus before a planned exit.

Model:

Models can vary but usually start with an assessment of where the business currently sits and where the business owner(s) need it or want it to get to. They then move on to a planning phase where steps are identified. Engagement can end there, but more typically continues in the form of regular sessions to monitor progress, adjust plans and advise on anything that has happened. This can take the form of coaching sessions or may involve non-exec directorships if the need arises.

It is worth noting that some M&A advisors in the SME space also offer these services as an addition or precursor to exit/sale services.

Strengths:

• Offers a way to materially improve valuation and positioning before a sale event giving you the ability to work towards the exit you want.
• This also helps to identify potential risks early giving you the opportunity to manage them out of the business creating a more valuable transaction when the time comes.
• Early intervention helps owners plan their timing, not just around personal circumstances, but also around external factors such as tax changes.

Weaknesses:

• There can be a disconnect if the same advisor is not subsequently involved in executing the sale
• This does require a longer-term commitment and the foresight of a business owner to consider their exit years in advance
• Outcomes are heavily dependent on the actions taken by the client and while advice might be accepted, implementation is another matter.

Which Advisor is Right for Me? What “Deal Tiers” Actually Mean

The UK business sale market operates in tiers, even if it is not formally labelled that way. Understanding which tier your business fits in will help you select the right support and evaluate the exit planning options open to you.

Sub-£1m deals

The typical profile of a sub £1m company:

• Making annual profit before tax of less than £200k
• Owner heavily involved in and central to the business – may be supported by a small team of 2-3 people
• May have a loyal, recurring client base but typically very little of this is contracted
• Any cash in the business is typically tied up in working capital requirement

Typical buyer types:

• Individual investors
• Management team – MBOs are more affordable at this level and can provide a good option for owners looking for an exit with a ‘friendly’ buyer.
• Competitors looking to take out a rival or expand through acquisition

£2m–£30m (core SME market)

The typical profile of a SME company:

• Making annual profit before tax of c. £300k to £5m – although there is some variation in this because valuations start to vary more at this level. A software business, for example, typically attracts a higher multiple due to recurring revenue models.
• Owner still likely to be heavily involved in the business but not as central to operations, tends to be supported by a larger team – it’s less likely, but not unheard of, for owners to be only minimally involved in the day-to-day business.
• More likely to have a loyal customer base, demonstrable recurring income and at least some contracted revenues.

Typical buyer types:

• Individual investors and MBOs become less likely at this stage due to the size of investment required.
• Private Equity may be considered, but usually through a portfolio company adopting a buy-and-build strategy.
• Competitors looking to take out a rival or expand through acquisition.
• Complementary businesses that share a common client base or offer similar, but not competing, products and services – potential benefits of acquisition multiply over market share or territory expansion.
• International businesses – deals at this level are often very attractive to businesses in Europe or USA looking for access or expansion into the UK market. This can, of course, work in both directions opening new markets to the acquired company.

£30m+ deals

The typical profile of a Mid-Market company:

• Making annual profit before tax of more than £5m – although at this level, profit alone is rarely a reliable indicator of value.
• Ownership is more likely to be diluted by previous investor rounds or may even be majority owned by another business. If the business is owner managed, it is likely they are less involved in business operations, usually adopting more of a chairperson type role.
• Quite likely to have a well-developed and diverse customer base, demonstrable recurring income and at strong contracted revenues.

Typical buyer types:

• Private Equity may be more interested in these firms, either as a stand-alone investment or as a portfolio company through which to pursue a buy-and-build strategy.
• Competitors looking to take out a rival or expand through acquisition are less likely due to size – depending on sector many competitors may either be of similar size or smaller.
• Complementary businesses that share a common client base or offer similar, but not competing, products and services – potential benefits of acquisition multiply over market share or territory expansion.
• International businesses – deals at this level are often very attractive to businesses in Europe or USA looking for access or expansion into the UK market. This can, of course, work in both directions opening new markets to the acquired company.

Questions to Ask Before Appointing an M&A Advisor

Of course, once you understand what type of business sale advice you need, you still have the challenge of how to choose an M&A Advisor or Business Broker. Here are a few questions you should ask before appointing any advisor:

What are the total costs and how does that break down?

Be sure to get a clear and comprehensive understanding of what fees are due and when. It’s important not to dismiss advisors who charge upfront fees automatically, but do make sure you are clear on the amount and quality of work they will put in for any upfront element.

What are their terms and conditions?

This is arguably as important as the fees charged. In particular you want to be clear on exit clauses if you decide to stop working with them, when payments are due – in particular any success fee elements, are they due on completion, or only when you get paid?

Who is likely to be on the team?

An advisor may not always be able to specify a team before sign-up, but you should ask about seniority, experience, what roles team members play and their specific expertise.

What do they need from you?

How much time is required from you at various stages in the process? What level of information do they need you to provide?

What level of support do they offer and at what stage?

What are they doing for you? What do they expect you to take the lead on or complete the work yourself?

Where Entrepreneurs Hub Fits

Entrepreneurs Hub has worked with owner-managed businesses that have sold for between £2m and £50m. This means we cover the SME market and a bit of the lower mid-market too.

We are sector agnostic, meaning we don’t have any particular specialisms – just good businesses in any sector. We see this as a strength as we consider every business on its merits and aren’t drawn in to ‘usual suspects’ thinking.

We have a senior team with specialist FD level financial support, time-served deal leads experienced on the buy-side as well as the sell-side of M&A, and dedicated support teams with specialist knowledge in document creation, research and demand generation.

In our experience, the most successful business sales begin well before a company is formally brought to market.

We work with business owners to:

• Understand value and buyer appetite.
• Prepare the business to attract the best buyers.
• Design and run a structured, competitive processes.

Because the difference between an average outcome and an exceptional one is rarely just one thing.
It is preparation, positioning, and the ability to find the right buyers for you and your business.

Final Thought

The UK M&A advisory market is not short of buyers.

It is short of prepared sellers and informed decisions.

With tax changes accelerating timelines and buyers becoming more sophisticated, the gap between well-prepared and under-prepared businesses is widening.

The earlier you understand your options, the more control you have over the outcome.